diff --git a/src/spec-node/dockerCompose.ts b/src/spec-node/dockerCompose.ts
index 4c20ebd68..6f21d54c9 100644
--- a/src/spec-node/dockerCompose.ts
+++ b/src/spec-node/dockerCompose.ts
@@ -243,6 +243,28 @@ export async function buildAndExtendDockerCompose(configWithRaw: SubstitutedConf
 				buildOverrideContent += `        - ${buildKitContext}=${featureBuildInfo.buildKitContexts[buildKitContext]}\n`;
 			}
 		}
+
+		// Handle labels
+		let labels: string[] = [];
+		// Add labels from params
+		if (params.additionalLabels && params.additionalLabels.length > 0) {
+			labels.push(...params.additionalLabels);
+		}
+		// Add labels from compose (dictionary)
+		if (composeService.labels && Object.keys(composeService.labels).length > 0) {
+			labels.push(...Object.entries(composeService.labels).map(([key, value]) => `${key}=${value}`));
+		}
+		// Add labels from compose (array)
+		if (composeService.labels && composeService.labels.length > 0) {
+			labels.push(...composeService.labels);
+		}
+		// Finally add all labels
+		if (labels.length > 0) {
+			buildOverrideContent += `      labels:\n`;
+			labels.forEach(label => {
+				buildOverrideContent += `        - ${label}\n`;
+			});
+		}
 	}
 
 	// Generate the docker-compose override and build
diff --git a/src/spec-node/singleContainer.ts b/src/spec-node/singleContainer.ts
index 07d111cc2..0f580281d 100644
--- a/src/spec-node/singleContainer.ts
+++ b/src/spec-node/singleContainer.ts
@@ -244,6 +244,10 @@ async function buildAndExtendImage(buildParams: DockerResolverParameters, config
 			}
 		}
 	}
+
+	// Add labels
+	args.push(...buildParams.additionalLabels.length > 0 ? buildParams.additionalLabels.map(label => ['--label', label]).flat() : []);
+
 	const buildArgs = config.build?.args;
 	if (buildArgs) {
 		for (const key in buildArgs) {
diff --git a/src/test/cli.build.test.ts b/src/test/cli.build.test.ts
index 0dfae0427..7e9d99e81 100644
--- a/src/test/cli.build.test.ts
+++ b/src/test/cli.build.test.ts
@@ -27,13 +27,68 @@ describe('Dev Containers CLI', function () {
 
 	describe('Command build', () => {
 
-		it('should build successfully with valid image metadata --label property', async () => {
+		it('should build successfully with valid image metadata --label property (image)', async () => {
 			const testFolder = `${__dirname}/configs/example`;
 			const response = await shellExec(`${cli} build --workspace-folder ${testFolder} --label 'name=label-test' --label 'type=multiple-labels'`);
 			const res = JSON.parse(response.stdout);
 			assert.equal(res.outcome, 'success');
-			const labels = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${res.imageName} | jq`);
-			assert.match(labels.stdout.toString(), /\"name\": \"label-test\"/);
+			const labelsResponse = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${res.imageName}`);
+			const labels = JSON.parse(labelsResponse.stdout);
+			assert.equal(labels.name, 'label-test');
+			assert.equal(labels.type, 'multiple-labels');
+		});
+
+		it('should build successfully with valid image metadata --label property (dockerfile)', async () => {
+			const testFolder = `${__dirname}/configs/example-dockerfile`;
+			const response = await shellExec(`${cli} build --workspace-folder ${testFolder} --label 'name=label-test' --label 'type=multiple-labels'`);
+			const res = JSON.parse(response.stdout);
+			assert.equal(res.outcome, 'success');
+			const labelsResponse = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${res.imageName}`);
+			const labels = JSON.parse(labelsResponse.stdout);
+			assert.equal(labels.name, 'label-test');
+			assert.equal(labels.type, 'multiple-labels');
+		});
+
+		it('should build successfully with valid image metadata --label property (compose)', async () => {
+			const testFolder = `${__dirname}/configs/compose-without-name`;
+			const image1 = 'image-1';
+			await shellExec(`docker rmi -f ${image1}`);
+			const res = await shellExec(`${cli} build --workspace-folder ${testFolder} --image-name ${image1} --label 'name=label-test' --label 'type=multiple-labels'`);
+			const response = JSON.parse(res.stdout);
+			assert.equal(response.outcome, 'success');
+			assert.equal(response.imageName[0], image1);
+			const labelsResponse = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${response.imageName[0]}`);
+			const labels = JSON.parse(labelsResponse.stdout);
+			assert.equal(labels.name, 'label-test');
+			assert.equal(labels.type, 'multiple-labels');
+		});
+
+		it('should build successfully with valid image metadata --label (inside compose as dictionary)', async () => {
+			const testFolder = `${__dirname}/configs/compose-with-labels`;
+			const image1 = 'image-1';
+			await shellExec(`docker rmi -f ${image1}`);
+			const res = await shellExec(`${cli} build --workspace-folder ${testFolder} --image-name ${image1}`);
+			const response = JSON.parse(res.stdout);
+			assert.equal(response.outcome, 'success');
+			assert.equal(response.imageName[0], image1);
+			const labelsResponse = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${response.imageName[0]}`);
+			const labels = JSON.parse(labelsResponse.stdout);
+			assert.equal(labels.name, 'label-test');
+			assert.equal(labels.type, 'multiple-labels');
+		});
+
+		it('should build successfully with valid image metadata --label (inside compose as array)', async () => {
+			const testFolder = `${__dirname}/configs/compose-with-labels-array`;
+			const image1 = 'image-1';
+			await shellExec(`docker rmi -f ${image1}`);
+			const res = await shellExec(`${cli} build --workspace-folder ${testFolder} --image-name ${image1}`);
+			const response = JSON.parse(res.stdout);
+			assert.equal(response.outcome, 'success');
+			assert.equal(response.imageName[0], image1);
+			const labelsResponse = await shellExec(`docker inspect --format '{{json .Config.Labels}}' ${response.imageName[0]}`);
+			const labels = JSON.parse(labelsResponse.stdout);
+			assert.equal(labels.name, 'label-test');
+			assert.equal(labels.type, 'multiple-labels');
 		});
 
 		it('should fail to build with correct error message for local feature', async () => {
diff --git a/src/test/configs/compose-with-labels-array/.devcontainer/devcontainer.json b/src/test/configs/compose-with-labels-array/.devcontainer/devcontainer.json
new file mode 100644
index 000000000..7b42997d3
--- /dev/null
+++ b/src/test/configs/compose-with-labels-array/.devcontainer/devcontainer.json
@@ -0,0 +1,5 @@
+{
+	"dockerComposeFile": "docker-compose.yml",
+	"service": "app",
+	"workspaceFolder": "/workspace"
+}
\ No newline at end of file
diff --git a/src/test/configs/compose-with-labels-array/.devcontainer/docker-compose.yml b/src/test/configs/compose-with-labels-array/.devcontainer/docker-compose.yml
new file mode 100644
index 000000000..0afcf22ce
--- /dev/null
+++ b/src/test/configs/compose-with-labels-array/.devcontainer/docker-compose.yml
@@ -0,0 +1,13 @@
+version: '3.8'
+
+name: custom-project-name
+
+services:
+  app:
+    image: ubuntu:latest
+    volumes:
+      - ..:/workspace:cached
+    command: sleep infinity
+    labels:
+      - "name=label-test"
+      - "type=multiple-labels"
diff --git a/src/test/configs/compose-with-labels/.devcontainer/devcontainer.json b/src/test/configs/compose-with-labels/.devcontainer/devcontainer.json
new file mode 100644
index 000000000..7b42997d3
--- /dev/null
+++ b/src/test/configs/compose-with-labels/.devcontainer/devcontainer.json
@@ -0,0 +1,5 @@
+{
+	"dockerComposeFile": "docker-compose.yml",
+	"service": "app",
+	"workspaceFolder": "/workspace"
+}
\ No newline at end of file
diff --git a/src/test/configs/compose-with-labels/.devcontainer/docker-compose.yml b/src/test/configs/compose-with-labels/.devcontainer/docker-compose.yml
new file mode 100644
index 000000000..d4181d4c0
--- /dev/null
+++ b/src/test/configs/compose-with-labels/.devcontainer/docker-compose.yml
@@ -0,0 +1,13 @@
+version: '3.8'
+
+name: custom-project-name
+
+services:
+  app:
+    image: ubuntu:latest
+    volumes:
+      - ..:/workspace:cached
+    command: sleep infinity
+    labels:
+      name: "label-test"
+      type: "multiple-labels"
diff --git a/src/test/configs/example-dockerfile/.devcontainer.json b/src/test/configs/example-dockerfile/.devcontainer.json
new file mode 100644
index 000000000..c972df2d4
--- /dev/null
+++ b/src/test/configs/example-dockerfile/.devcontainer.json
@@ -0,0 +1,11 @@
+// Example devcontainer.json configuration with a Dockerfile
+{
+	"build": {
+		"dockerfile": "Dockerfile"
+	},
+	"features": {
+		"ghcr.io/devcontainers/features/go:1": {
+			"version": "latest"
+		}
+	}
+}
\ No newline at end of file
diff --git a/src/test/configs/example-dockerfile/Dockerfile b/src/test/configs/example-dockerfile/Dockerfile
new file mode 100644
index 000000000..87589e56e
--- /dev/null
+++ b/src/test/configs/example-dockerfile/Dockerfile
@@ -0,0 +1 @@
+FROM mcr.microsoft.com/devcontainers/base:bookworm